Core allocations to Asia Pacific residential markets cannot ignore Japan for it is currently the only country in the region with an en-bloc rental residential market of any appreciable size. Japan’s demographic challenges are well-known; national-level depopulation was observed for the first time in 2015 by the national census. However, internal migration patterns continue to show solid population growth in nine of the 10 largest cities, and this is especially pronounced in their inner wards. Over 90% of recent migrants into the Tokyo 23 wards area and other large cities were under 30 years old; meanwhile, there is a consistent net outflow of retirees from Tokyo. Thus internal migration patterns continuously rebalance Tokyo towards those cohorts which are of prime labor force-participation age and family-formation age. This results in increasing demand for residential property, and most other major cities show a similar pattern. The upcoming 2020 Tokyo Olympics is meant to be a stage to showcase a new Japan, but perhaps more important than the two-week duration of the actual event is the considerable construction and planning currently underway, not to mention the impressive numbers of international tourists flocking to the city and beyond. Several risk factors need to be carefully monitored, most notably rising protectionism, which is a global threat, and the planned consumption tax hike, which is a specifically local threat to the currently robust pace of GDP growth.
Source : CBRE Global Investors